EXHIBIT 10.3 to SCANNER TECHNOLOGIES CORPORATION FORM 10-Q DATED JUNE 30, 2004






EXHIBIT 10.3  



PROMISSORY NOTE  


	

	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call/Collateral	 	Account	 	Officer	 	Initials	 
	$        1,300,000.00	 	03-31-2003	 	05-01-2004	 	111518	 	11/3450	 	153949	 	532	 
	

	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. 
	










	Borrower:	 	SCANNER TECHNOLOGIES CORPORATION	 	Lender:	 	BREMER BANK, NATIONAL ASSOCIATION	 
	 	 	14505 21st Avenue #220 	 	 	 	St. Anthony Office	 
	 	 	Minneapolis, MN 55447	 	 	 	2401 Lowry Ave. NE	 
	 	 		 	 	 	St. Anthony, MN 55418-4000	 







Principal Amount:   $1,300,000.00                  Initial Rate:   4.250%                  Date of Note:   March 31, 2003 



PROMISE TO PAY.    SCANNER TECHNOLOGIES
CORPORATION (“Borrower”) promises to pay to BREMER BANK, NATIONAL ASSOCIATION (“Lender”), or order,
in lawful money of the United States of America, the principal amount of One Million Three Hundred Thousand & 00/100
Dollars ($1,300,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal
balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.




PAYMENT.    Borrower will pay this loan in one
payment of all outstanding principal plus all accrued unpaid interest on May 1, 2004. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment date, beginning May 1, 2003, with all
subsequent interest payments to be due on the same day of each month after that.Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges. The annual interest rate for this Note is computed on
a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.




VARIABLE INTEREST RATE.    The interest rate on
this Note is subject to change from time to time based on changes in an index which is the rate as announced from time
to time by Bremer Bank, National Association (the “Index”). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the
current Index rate upon Borrower’s request. The interest rate change will not occur more often than each day.
Borrower understands that Lender may make loans based on other rates as well. The Index currently is 4.250% per annum.
The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index,
resulting in an initial rate of 4.250% per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law. 



PREPAYMENT; MINIMUM INTEREST CHARGE.    In any
event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest charge
of$10.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees not to send 









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lender payments marked “paid in full”, without
recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of
Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other payment instrument that indicates that
the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Bremer Bank, National
Association; St. Anthony Office; 2401 Lowry Ave. NE; St. Anthony, MN 55418-4000. 



LATE CHARGE.    If a payment is 10 days or more
late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment. 



INTEREST AFTER DEFAULT.    Upon default,
including failure to pay upon final maturity, Lender, at its option, may if permitted under applicable law, increase the
variable interest rate on this Note to 2.000 percentage points over the Index. The interest rate will not exceed the
maximum rate permitted by applicable law. 



DEFAULT.    Each of the following shall
constitute an event of default (“Event of Default”) under this Note: 



	  	
Payment Default.   Borrower fails to make any payment when due under this Note. 






	  	Other Defaults.   Borrower fails to
comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower. 






	  	
Default in Favor of Third Parties.   Borrower or any Grantor defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower’s property or Borrower’s ability to repay this Note or
perform Borrower’s obligations under this Note or any of the related documents. 






	  	
False Statements.   Any warranty, representation or statement made or furnished to Lender by Borrower or
on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading at any time thereafter. 






	  	
Insolvency.   The dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower. 






	  	
Creditor or Forfeiture Proceedings.   Commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental
agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts,
including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute
by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender
monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute. 







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	  	Events Affecting Guarantor.   Any of the
preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by
this Note. 






	  	
Change in Ownership.   Any change in ownership of twenty-five percent (25%) or more of the common stock
of Borrower. 






	  	
Adverse Change.   A material adverse change occurs in Borrower’s financial condition, or Lender
believes the prospect of payment or performance of this Note is impaired. 






LENDER’S RIGHTS.   Upon default, Lender may
declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount. 



ATTORNEYS’ FEES; EXPENSES.   Lender may hire or
pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender’s reasonable attorneys’ fees and Lender’s
legal expenses, whether or not there is a lawsuit, including reasonable attorneys’fees, expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. 



JURY WAIVER.   Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the
other. 



GOVERNING LAW.   This Note will be governed by,
construed and enforced in accordance with federal law and the laws of the State of Minnesota. This Note has been
accepted by Lender in the State of Minnesota. 



DISHONORED ITEM FEE.   Borrower will pay a fee to
Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which
Borrower pays is later dishonored. 



RIGHT OF SETOFF.   To the extent permitted by
applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts
Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for
which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to
administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in
this paragraph. 



COLLATERAL.   Borrower acknowledges this Note is
secured by all assets as listed in the Commercial Security Agreement dated March 31, 2003, between the Borrower and the
Lender. 



LINE OF CREDIT.   This Note evidences a revolving
line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this
paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above.
The following person currently is authorized to request advances and authorize payments under the line of credit until
Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of his or her
authority: Elwin M. Beaty, President of SCANNER TECHNOLOGIES CORPORATION. Borrower agrees to be liable for all sums
either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of
Borrower’s accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender’s internal records, 




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including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or
any agreement that Borrower or any guarantor has with Lender, including any agreement made n connection with the signing
of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Note or any other loan
with Lender; or (D) Borrower has applied funds provided pursuant to this Note for purposes other than those
authorized by Lender. 



PRIOR NOTE.   This Promissory Note is in
substitution for but not in payment of that certain Promissory Note dated March 28, 2002, between SCANNER TECHNOLOGIES
CORPORATION (“Borrower”) and Bremer Bank, National Association (“Lender”). 



SUCCESSOR INTERESTS.   The terms of this Note shall
be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns. 



NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING
AGENCIES.   Please notify us if we report any inaccurate information about your account(s) to a consumer
reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following
address: Bremer Service Center 8555 Eagle Point Boulevard Lake Elmo, MN 55042.




GENERAL PROVISIONS.   Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing no party
who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All
such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with
whom the modification is made. The obligations under this Note are joint and several. 



SECTION DISCLOSURE.   This loan is made under
Minnesota Statutes, Section 47.59. 



PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. 



BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS
PROMISSORY NOTE. 



BORROWER:  



SCANNER TECHNOLOGIES CORPORATION  



By:    /s/   Elwin M. Beaty

          Elwin M. Beaty, President of

          SCANNER TECHNOLOGIES CORPORATION 









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COMMERCIAL SECURITY AGREEMENT 


	

	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call/Collateral	 	Account	 	Officer	 	Initials	 
	$1,300,000.00	 	03-31-2003	 	05-01-2004	 	111518	 	11/3450	 	153949	 	532	 
	

	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. 
	






	Grantor:	 	SCANNER TECHNOLOGIES CORPORATION	 	Lender:	 	BREMER BANK, NATIONAL ASSOCIATION	 
	 	 	14505 21st Avenue #220 	 	 	 	St. Anthony Office	 
	 	 	Minneapolis, MN 55447	 	 	 	2401 Lowry Ave. NE	 
	 	 		 	 	 	St. Anthony, MN 55418-4000	 









THIS COMMERCIAL SECURITY AGREEMENT dated March 31, 2003, is made
and executed between SCANNER TECHNOLOGIES CORPORATION (“Grantor”) and Bremer Bank, National Association
(“Lender”). 



GRANT OF SECURITY INTEREST. For valuable consideration, Grantor
grants to Lender a security interest in the Collateral to secure the indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by
law. 



COLLATERAL DESCRIPTION. The word “Collateral” as used in
this Agreement means the following described property, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment of the
indebtedness and performance of all other obligations under the Note and this Agreement. 



	  	All inventory, equipment, accounts (including but not
limited to all health-care-insurance receivables), chattel paper, instruments (including but not limited to all
promissory notes), letter-of-credit rights, letters of credit, documents, deposit accounts, investment property, money,
other rights to payment and performance, and general intangibles (including but not limited to all software and all
payment intangibles); all oil, gas and other minerals before extraction; all oil, gas, other minerals and accounts
constituting as-extracted collateral; all fixtures; all timber to be cut; all attachments, accessions, accessories,
fittings, increases, tools, parts, repairs, supplies, and commingled goods relating to the foregoing property, and all
additions, replacements of and substitutions for all or any part of the foregoing property; all insurance refunds
relating to the foregoing property; all good will relating to the foregoing property; all records and data and embedded
software relating to the foregoing property, and all equipment, inventory and software to utilize, create, maintain and
process any such records and data on electronic media; and all supporting obligations relating to the foregoing
property; all whether now existing or hereafter arising, whether now owned or hereafter acquired or whether now or
hereafter subject to any rights in the foregoing property; and all products and proceeds (including but not limited to
all insurance payments) of or relating to the foregoing property. 






In addition, the work “Collateral” also includes all the
following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located:




	  	(A)    All accessions, attachments,
accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whether
added now or later. 






	  	(B)    All products and produce of
any of the property described in this Collateral section.








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	  	(C)    All accounts, general
intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section. 






	  	(D)    All proceeds (including
insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that
party’s insurer, whether due to judgment, settlement or other process. 






	  	(E)    All records and data
relating to any of the property described in this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor’s right, title, and interest in and to all
computer software required to utilize, create, maintain, and process any such records or data on electronic media.







Despite any other provision of this Agreement, Lender is not
granted, and will not have, a nonpurchase money security interest in household goods, to the extent such a security
interest would be prohibited by applicable law. In addition, if because of the type of any Property, Lender is required
to give a notice of the right to cancel under Truth in Lending for the indebtedness, then Lender will not have a
security interest in such Collateral unless and until such a notice is given. 



RIGHT OF SETOFF.   To the extent permitted by
applicable law, Lender reserves a right of setoff in all Grantor’s accounts with Lender (whether checking, savings,
or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may
open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff
would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff
all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively
freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.




GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that: 



	  	Perfection of Security
Interest.   Grantor agrees to execute financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender’s security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will
note Lender’s interest upon any and all chattel paper if not delivered to Lender for possession by Lender. This is
a continuing Security Agreement and will continue in effect even though all or any part of the indebtedness is paid in
full and even though for a period of time Grantor may not be indebted to Lender. 






	  	Notices to Lender.   Grantor will
promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate
from time to time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s assumed business
name(s); (3) change in the management of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in
Grantor’s principal office address; (6) change in Grantor’s state of organization; (7) conversion of Grantor
to a new or different type of business entity; or (8) change in any other aspect of Grantor that directly or indirectly
relates to any agreements between Grantor and Lender. No change in Grantor’s name or state of organization will
take effect until after Lender has received notice. 






	  	No Violation.   The execution and
delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement.








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	  	Enforceability of Collateral.   To the
extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable
laws and regulations concerning form, content and manner or preparation and execution, and all persons, appearing to be
obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on
the Collateral. At the time any Account becomes subject to a security interest in favor of Lender, the Account shall be
a good and valid account representing an undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or previously shipped or delivered pursuant to a contract of sale, or
for services previously performed by Grantor with or for the account debtor. So long as this Agreement remains in
effect, Grantor shall not, without Lender’s prior written consent, compromise, settle, adjust, or extend payment
under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral, and
no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral
except those disclosed to Lender in writing. 






	  	Location of the Collateral.   Except in
the ordinary course of Grantor’s business, Grantor agrees to keep the Collateral (or to the extent the Collateral
consists of intangible property such as accounts or general intangibles, the records concerning the Collateral) at
Grantor’s address shown above or at such other locations as are acceptable to Lender. Upon Lender’s request,
Grantor will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations
relating to Grantor’s operations, including without limitation the following: (1) all real property Grantor owns or
is purchasing; (2) all real property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may be located. 






	  	Removal of the Collateral.   Except in
the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing location without Lender’s prior written consent. To the extent that the Collateral
consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of Minnesota, without Lender’s prior
written consent. Grantor shall, whenever requested, advise Lender of the exact location of the Collateral. 






	  	Transactions Involving
Collateral.   Except for inventory sold or accounts collected in the ordinary course of Grantor’s
business, or as otherwise provided for in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer
or dispose of the Collateral. While Grantor is not in default under this Agreement, Grantor may sell inventory, but only
in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinary course of business. A
sale in the ordinary course of Grantor’s business does not include a transfer in partial or total satisfaction of a
debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided,
however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender. 






	  	Title.    Grantor represents and
warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in
any public office other than those which reflect the security interest created by this Agreement or to which Lender has 







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	  	specifically consented. Grantor shall defend
Lender’s rights in the Collateral against the claims and demands of all other persons. 






	  	
Repairs and Maintenance.   Grantor agrees to keep and maintain, and to cause others to keep and maintain,
the Collateral in good order, repair and condition at all times while this Agreement remains in effect. Grantor further
agrees to pay when due all claims for work done on, or services rendered or material furnished in connection with the
Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral. 






	  	
Inspection of Collateral.   Lender and Lender’s designated representatives and agents shall have the
right at all reasonable times to examine and inspect the Collateral wherever located. 






	  	
Taxes, Assessments and Liens.   Grantor will pay when due all taxes, assessments and liens upon the
Collateral, its use or operation, upon this Agreement, upon any promissory note or notes evidencing the indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as
Lender’s interest in the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a
sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, reasonable attorneys’ fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy
any final adverse judgment before enforcement against the Collateral. Grantor shall name Lender as an additional obligee
under any surety bond furnished in the contest proceedings. Grantor further agrees to furnish Lender with evidence that
such taxes, assessments, and governmental and other charges have been paid in full and in a timely manner. Grantor may
withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in the Collateral is not jeopardized.







	  	
Compliance with Governmental Requirements.   Grantor shall comply promptly with all laws, ordinances,
rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral, including all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender’s interest in the Collateral, in Lender’s
opinion, is not jeopardized. 






	  	
Hazardous Substances.   Grantor represents and warrants that the Collateral never has been, and never
will be so long as this Agreement remains a lien on the Collateral, used in violation of any Environmental Laws or for
the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any
Hazardous Substance. The representations and warranties contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous substances. Grantor hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any
Environmental Laws, and (2) agrees to indemnify and hold harmless Lender against any and all claims and losses resulting
from a breach of this provision of this Agreement. This obligation to indemnify shall survive the payment of the
indebtedness and the satisfaction of this Agreement. 







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Maintenance of Casualty Insurance.   Grantor shall procure and maintain all risks insurance, including
without limitation fire, theft and liability coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company
or companies reasonably acceptable to Lender, Grantor, upon request of Lender, will deliver to Lender from time to time
the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not
be cancelled or diminished without at least ten (10) days’ prior written notice to Lender and not including any
disclaimer of the insurer’s liability for failure to give such a notice. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or
default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may
require. If Grantor at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may
(but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if Lender so chooses
“single interest insurance,” which will cover only Lender’s interest in the Collateral. 






	  	
Application of Insurance Proceeds.   Grantor shall promptly notify Lender of any loss or damage to the
Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the indebtedness, and shall pay the balance to Grantor. Any proceeds which have not
been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or
restoration of the Collateral shall be used to prepay the indebtedness. 






	  	
Insurance Reserves.   Lender may require Grantor to maintain with Lender reserves for payment of
insurance premiums, which reserves shall be created by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due date, amounts at least equal to the insurance
premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shall upon
demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute
a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be paid by
Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of
premiums shall remain Grantor’s sole responsibility. 






	  	
Insurance Reports.   Grantor, upon request of Lender, shall furnish to Lender reports on each existing
policy of insurance showing such information as Lender may reasonably request including the following: (1) the name of
the insurer; (2) the risks insured; (3) the amount of the policy; (4) the property insured; (5) the then current value
on the basis of which insurance has been obtained and the manner of determining that value; and (6) the expiration date
of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost of the
Collateral. 






	  	
Financing Statements.   Grantor authorizes Lender to file a UCC-1 financing statement, or alternatively,
a copy of this Agreement to perfect Lender’s security interest. At Lender’s request, 







5 













	  	Grantor additionally agrees to sign all other documents
that are necessary to perfect, protect, and continue Lender’s security interest in the Property. Grantor will pay
all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless Lender is
required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute financing statements and
documents of title in Grantor’s name and to execute all documents necessary to transfer title if there is a
default. Lender may file a copy of this Agreement as a financing statement. If Grantor changes Grantor’s name or
address, or the name or address of any person granting a security interest under this Agreement changes, Grantor will
promptly notify the Lender of such change. 






GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT
ACCOUNTS.   Until default and except as otherwise provided below with respect to accounts, Grantor may
have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement or the Related Documents, provided that Grantor’s right to possession
and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to
perfect Lender’s security interest in such Collateral. Until otherwise notified by Lender, Grantor may collect any
of the Collateral consisting of accounts. At any time and even though no Event of Default exists, Lender may exercise
its rights to collect the accounts and to notify account debtors to make payments directly to Lender for application to
the indebtedness. If Lender at any time has possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender
takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in
the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the
indebtedness. 



LENDER’S EXPENDITURES.   If any action or
proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor’s
failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any
Related Documents, Lender on Grantor’s behalf may (but shall not be obligated to) take any action that Lender deems
appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at
the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such
expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with any installment payments to become due
during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated
as a balloon payment which will be due and payable at the Note’s maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon
Default.




DEFAULT.     Each of the following shall
constitute an Event of Default under this Agreement: 



	  	Payment Default.   Grantor fails to make
any payment when due under the indebtedness. 






	  	
Other Defaults.   Grantor fails to comply with or to perform any other term, obligation, covenant or
condition contained in the Agreement or in any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between Lender and Grantor. 









6 












	  	
Default in Favor of Third Parties.   Should Borrower or any Grantor default under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Grantor’s property or Grantor’s or any Grantor’s ability to
repay the Indebtedness or perform their respective obligations under this Agreement or any of the Related Documents.







	  	
False Statements.   Any warranty, representation or statement made or furnished to Lender by Grantor or
on Grantor’s behalf under this Agreement or the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading at any time thereafter. 






	  	
Defective Collateralization.   This Agreement or any of the Related Documents ceases to be in full force
and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at
any time and for any reason. 






	  	
Insolvency.   The dissolution or termination of Grantor’s existence as a going business, the
insolvency of Grantor, the appointment of a receiver for any part of Grantor’s property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor. 






	  	
Creditor or Forfeiture Proceedings.   Commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental
agency against any collateral security the Indebtedness. This includes a garnishment of any of Grantor’s accounts,
including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute
by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding
and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as
being an adequate reserve or bond for the dispute. 






	  	
Events Affecting Guarantor.   Any of the preceding events occurs with respect to Guarantor of any of the
Indebtedness or Guarantor dies or becomes incompetent or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. 






	  	
Adverse Change.   A material adverse change occurs in Grantor’s financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is impaired. 






	  	
Insecurity.   Lender in good faith believes itself insecure. 






RIGHTS AND REMEDIES ON DEFAULT.   If an Event of
Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under
the Minnesota Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the
following rights and remedies: 



	  	
Accelerate Indebtedness.   Lender may declare the entire indebtedness, including any prepayment penalty
which Grantor would be required to pay, immediately due and payable, without notice of any kind to Grantor. 






	  	
Assemble Collateral.   Lender may require Grantor to deliver to Lender all or any portion of the
Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require
Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also
shall have full power to enter upon the property of 










7 













	  	Grantor to take possession of and remove the Collateral.
If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees Lender
may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession.







	  	
Sell the Collateral.   Lender shall have full power to sell, lese, transfer, or otherwise deal with the
Collateral or proceeds thereof in Lender’s own name or that of Grantor. Lender may sell the Collateral at public
auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold
on a recognized market, Lender will give Grantor, and other persons as required by law, reasonable notice of the time
and place of any public sale, or the time after which any private sale or any other disposition of the Collateral is to
be made. However, no notice need be provided to any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person’s right to notification of sale. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid.







	  	
Appoint Receiver.   Lender shall have the right to have a receiver appointed to take possession of all or
any part of the Collateral, with the power to protect and preserve the Collateral, to operate the collateral preceding
foreclosure or sale, and to collect the Rents from the Collateral and apply the proceeds, over and above the cost of the
receivership, against the indebtedness. The receiver may serve without bond if permitted by law. Lender’s right to
the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Indebtedness
by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. 






	  	
Collect Revenues, Apply Accounts.   Lender, either itself or through a receiver, may collect the
payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender’s discretion transfer
any Collateral into Lender’s own name or that of Lender’s nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such
order or preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be
sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment,
shipment, or storage of any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender. 






	  	
Obtain Deficiency.   If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment
against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsection is a sale of accounts or chattel paper. 






	  	
Other Rights and Remedies.   Lender shall have all the rights and remedies of a secured creditor under
the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise. 









8 













	  	
Election of Remedies.   Except as may be prohibited by applicable law, all of Lender’s rights and
remedies, whether evidenced by this Agreement, the Related Documents, or by any other writing, shall be cumulative and
may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuant of any
other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this
Agreement, after Grantor’s failure to perform, shall not effect Lender’s right to declare a default and
exercise its remedies. 






MISCELLANEOUS PROVISIONS.  The
following miscellaneous provisions are a part of this Agreement:  



	  	Amendments.   This Agreement, together
with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment. 






	  	
Attorneys’Fees; Expenses.   Grantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in
connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement,
and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable
attorneys’fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and
legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court. 






	  	
Caption Headings.   Caption headings in this Agreement are for convenience purposes only and are not to
be used to interpret or define the provisions of this Agreement. 






	  	
Governing
Law. This Agreement will be governed by, construed and enforced in accordance with
federal law and the laws of the State of Minnesota. This Agreement has been accepted by
Lender in the State of Minnesota.  






	  	No Waiver by Lender.   Lender shall not
be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as a wavier of such right or any other
right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s
right otherwise to demand strict compliance with that provision or any other provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender’s rights or of any of Grantor’s obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender. 






	  	
Notices.   Any notice required to be given under this Agreement shall be given in writing, and shall be
effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when
deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as
first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this
Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change the party’s address. For 







9 












	  	notice purposes, Grantor agrees to keep Lender informed
at all times of Grantor’s current address. Unless otherwise provided or required by law, if there is more than one
Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors. 






	  	
Power
of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable
attorney-in-fact for the purpose of executing any documents necessary to perfect, amend,
or to continue the security interest granted in this Agreement or to demand termination
of filings of other secured parties. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing statement. Grantor will
reimburse Lender for all expenses for the perfection and the continuation of the
perfection of Lender’s security interest in the Collateral.  






	  	
Severability.   If a court of competent jurisdiction finds any provision of this Agreement to be illegal,
invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid,
or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered
deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any
provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this
Agreement. 






	  	
Successors and Assigns.   Subject to any limitations stated in this Agreement on transfer of
Grantor’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender, without notice to
Grantor, may deal with Grantor’s successors with reference to this Agreement and the indebtedness by way of
forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the
Indebtedness. 






	  	
Survival of Representations and Warranties.   All representations, warranties, and agreements made by
Grantor in this Agreement shall survive the execution and delivery of this Agreement, shall be continuing in nature, and
shall remain in full force and effect until such time as Grantor’s Indebtedness shall be paid in full. 






	  	
Time is of the Essence.   Time is of the essence in the performance of this Agreement. 






DEFINITIONS.   The following capitalized words and
terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all
references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in
the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and
terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial
Code: 



	  	
Account.   The word “Account” means a trade account, account receivable, other receivable, or
other right to payment for goods sold or services rendered owing to Grantor (or to a third party grantor acceptable to
Lender). 






	  	
Agreement.   The word “Agreement” means this Commercial Security Agreement, as this Commercial
Security Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to
this Commercial Security Agreement from time to time. 






	  	
Borrower.   The word “Borrower” means SCANNER TECHNOLOGIES CORPORATION, and all other persons
and entities signing the Note in whatever capacity. 










10 













	  	
Collateral.   The word “Collateral” means all of Grantor’s right, title and interest in
and to all the Collateral as described in the Collateral Description section of this Agreement. 






	  	
Default.   The word “Default” means the Default set forth in this Agreement in the section
titled “Default”. 






	  	
Environmental Laws.   The words “Environmental Laws” mean any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant thereto or common law, and shall also include pollutants, contaminants, polychlorinated
biphenyls, asbestos, urea formaldehyde, petroleum and petroleum products, and agricultural chemicals. 






	  	
Event of Default.   The words “Event of Default” mean any of the events of default set forth in
this Agreement in the default section of this Agreement. 






	  	
Grantor.   The word “Grantor” means SCANNER TECHNOLOGIES CORPORATION. 






	  	
Guarantor.   The word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the Indebtedness. 






	  	
Guaranty.   The word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note. 






	  	
Hazardous Substances.   The words “Hazardous Substances” mean materials that, because of their
quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and
include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under
the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos. 






	  	
Indebtedness.   The word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other indebtedness and costs and expenses for which
Grantor is responsible under this Agreement or under any of the Related Documents. 






	  	
Lender.   The word “Lender” means Bremer Bank, National Association, its successors and
assigns. 






	  	
Note.   The word “Note” means the Note executed by SCANNER TECHNOLOGIES CORPORATION in the
principal amount of $1,300,000.00 dated March 31, 2003, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit agreement. 






	  	
Property.   The word “Property” means all of the Grantor’s right, title and interest in
and to all the Property as described in the “Collateral Description” section of this Agreement. 








11 












	  	
Related Documents.   The words “Related Documents” mean all promissory notes, credit
agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust,
security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the indebtedness. 






GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 31, 2003. 



GRANTOR: 



SCANNER TECHNOLOGIES CORPORATION 



By:    /s/   Elwin M. Beaty

          Elwin M. Beaty, President of

          SCANNER TECHNOLOGIES CORPORATION 






12 












CHANGE IN TERMS AGREEMENT 


	

	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call/Collateral	 	Account	 	Officer	 	Initials	 
	$1,300,000.00	 	03-31-2003	 	05-01-2004	 	111518	 	11/3450	 	153949	 	532	 
	

	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. 
	







	Borrower:	 	SCANNER TECHNOLOGIES CORPORATION	 	Lender:	 	BREMER BANK, NATIONAL ASSOCIATION	 
	 	 	14505 21st Avenue #220 	 	 	 	St. Anthony Office	 
	 	 	Minneapolis, MN 55447	 	 	 	2401 Lowry Ave. NE	 
	 	 		 	 	 	St. Anthony, MN 55418-4000	 







Principal Amount:   $1,300,000.00                  Initial Rate:   4.250%                  Date of Agreement:   March 31, 2003 





DESCRIPTION OF EXISTING INDEBTEDNESS.   A Promissory
Note dated March 31, 2003, in the original principal amount of $1,300,000.00 and that certain Business Loan Agreement
dated March 28, 2002, between SCANNER TECHNOLOGIES CORPORATION (“Borrower”) and Bremer Bank, National
Association (“Lender”). 



DESCRIPTION OF COLLATERAL.   All assets as listed in the Commercial
Security Agreement dated March 31, 2003, between the Borrower and the Lender. 



DESCRIPTION OF CHANGE IN TERMS.   This Change in
Terms Agreement shall serve to amend the above described Loan Agreement as follows: 



Guaranties.   Prior to disbursement of any loan
proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on
Lender’s forms, and in the amounts and under the conditions spelled out in those guaranties. 


	Guarantors
		Amounts

	Robert P. Bringer and Ruther E. Bringer	 	 	$	 100,000.00	 
	David B. Fernald	 	 	$	 100,000.00	 
	Michael Thorsland	 	 	$	 200,000.00	 
	Nicholas J. Kuhn and Colleen  M. Kuhn	 	 	$	 200,000.00	 
	Josef L. Kuhn	 	 	$	 200,000.00	 
	Gerald G. Mueller	 	 	$	 100,000.00	 
	Larry Hopfenspinger	 	 	$	 100,000.00	 
	Steven Scott Bruggeman	 	 	$	 100,000.00	 
	Donald E. Halla	 	 	$	 200,000.00	 






NONUSE FEE.   So long as the Lender has any
obligation to make advances hereunder, Borrower shall pay to Lender a NONUSE FEE at the rate of one-quarter of one
percent (.25%) per annum of the daily average of the difference between $1,300,000.00 and the outstanding balance under
the Line of Credit. The NONUSE FEE shall be computed by the Lender quarterly as of the last day of each calendar
quarter. 



CONTINUING VALIDITY.   Except as expressly changed
by this Agreement, the terms of the original obligation of or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not
waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future
change in terms. Nothing n this Agreement will constitute a satisfaction of the obligation(s). It is the intention of
Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any Maker or 







1 













endorser, including accommodation makers, will not be released by
virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all
persons signing below acknowledge that this Agreement is given conditionally, based on this representation to Lender
that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by
it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent
actions. 



PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE
AGREEMENT. 



BORROWER: 



SCANNER TECHNOLOGIES CORPORATION 



By:    /s/   Elwin M. Beaty

          Elwin M. Beaty, President of

          SCANNER TECHNOLOGIES CORPORATION 





















2